Tax time is here and it is always a confusing time for many crypto enthusiasts. Cryptocurrency taxes in Australia are an accountant’s worst nightmare. This is partially due to the nature of many countries’ regulations on cryptocurrencies.
What you need to know about cryptocurrency taxes in Australia
The Australian Taxation Office (ATO), imposes Cryptocurrency taxes in Australia as a Capital gains tax (CGT) when you dispose of said crypto.
This event occurs when you:
- sell or gift cryptocurrency
- trade or exchange cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency)
- convert cryptocurrency to fiat currency (a currency established by government regulation or law ), such as Australian dollars, or
- use cryptocurrency to obtain goods or services.
With this said, traders can have a very long time ahead calculating their taxes for the year as every time the trade. It may impose taxes under the CGT.
Another frustrating thing to calculate is the cryptocurrency value in Australian dollars (AUD) when a CGT event occurs making things more difficult. As can tell, this is just another thing accountants hate.
Does a business have the same responsibilities as personal when dealing with cryptocurrency taxes in Australia?
As usual, it is best to consult a qualified professional. However, we also know that many are opting to do their taxes, even for a business.
There are differences when considering cryptocurrencies for taxes as the ATO describes examples of businesses that involve Cryptocurrencies as:
- cryptocurrency trading businesses.
- cryptocurrency mining businesses.
- crypto exchange businesses (including ATMs).
Furthermore, they have a different calculation to personal which is classed as a CGT. For businesses, it is carried under the Trading Stock rules.
For more information on businesses involving cryptocurrencies, you can refer to HERE.
There is a light at the end of the tunnel
Through a good friend of ours, Crypto Koala had utilised a great tool for tax time. The name of the Cryptocurrency tax program was none other than Koinly. In his twitter post dated 14/7/2020, Crypto Koala stated he saved hours using this tool to do his Cryptocurrency taxes in Australia. Source
On their site, you can see the bold statement of “Crypto tax reports in under 20 minutes”. Which can easily be seen due to the nature of the automated calculations. These calculations are worked via. API or CSV and supported by. At the time of writing, 350+ exchanges, 73 wallets, 6000+ cryptocurrencies, 9 services and 14 blockchains.
Crypto Koalas view on Koinly
After a conversation with Crypto Koala he had said,
“After receiving an email from the Australian Taxation Office (ATO), informing that I have previously disposed of Cryptocurrency in the past, this prompted me to do my tax return. I knew that this was an arduous task. Having to work out each transaction, going through each exchange and wallets. Hours of work! I knew that there were Cryptocurrency sites out there that have the capability to pull data from your previously used exchanges to calculate your tax gains and losses. So I went on my search and in my quest, I discovered Koinly! It was a stand out because not only does it pull exchange data, but data from you wallets as well. Say MEW or a Neon wallet with just the address needed.
Well the whole process was less than an hour and saved a lot of stress. So I will be using Koinly next year for sure!”
With the site stating less than 20 minutes, Crypto Koala stated that most of the time spent was adding wallets and exchanges. This process next year will most likely be quicker.
You can find Crypto Koala on Twitter and Youtube.
What does Koinly track?
Koinly has an intricate program and API which can track your actual Return On Investment (ROI) and how much fiat is invested.
Furthermore, it works out all your income through various sources. Including, Mining, Staking, lending and other forms of crypto income. So with their smart API and AI intuitive programming you don’t have to worry about going backwards and forwards working out all the details.
There is unfortunately a downside to those nice little signup bonuses, referrals and airdrops.
Last year in 2019 the IRS in America declared that airdrops are considered income.
This also rings true for any Forks that occur. The only time it doesn’t, according to the IRS is if a new soft fork doesn’t change it’s token. The Australian Taxation Office also calls this a “chainsplit”.
With that said, Koinly also tracks those little bonuses you had received.
What countries are supported?
As per their site, they have a comprehensive list of countries that they support.
Also according to their site these are not all of them and can support over 100 countries.
Therefore with this list it is no wonder that they have a great review for doing your Cryptocurrency taxes.
If your country uses any of their supported cost basis methods (such as FIFO, LIFO etc). Koinly promotes that they can help you with your cryptocurrency taxes. This allows Koinly to be quite a remarkable tax tool on the global stage and not just in Australia.
With any financial advice, seek a professional
It’s always handy to have certain tools to help work out your cryptocurrency tax in Australia. We recommend that a qualified professional in tax accounting is used to learn more about your liabilities.
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